December 3, 2010
BY Erin Krueger
Leaders in the advanced biofuel and bioproducts sector are stressing the need for federal lawmakers to develop parity in the tax code and federal policy that would allow the biorefining sector to stand on even footing with other renewable energy sources, such as wind and solar.
"The U.S. has a real potential to lead the world in creating a biobased economy that generates thousands of new jobs and significant economic growth in research, manufacturing, agriculture and transportation fuels," said Brent Erickson, executive vice president of the Biotechnology Industry Organization. "We think that congressional policies enacted in the lame duck session of Congress could help ensure the potential does not slip from our grasp."
The USDA has made it clear that it is the lead federal agency for the deployment of biorefineries, but they need tools and funding to succeed in that effort, Erickson continued. "We don’t think you can just depend on USDA for deployment however," he said. "We also think that you need to look at what the Department of Defense can do to help commercialize the good R&D work that’s been done to date. This is a national security issue, and the Department of Defense is an important customer, particularly for some of the drop-in fuels being developed today."
Military interests in biofuels and bioproducts is expected to be a trend driving the biorefining industry in 2011 and beyond, Erickson said. "Congress has an important role to pay in actualizing these trends by crafting new energy and tax policies that recognize production of advanced biofuels, renewable chemicals and biobased products as vital to the nation’s economic competitiveness as well as our national security."
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There is a promise in America for a paradigm shift to biofuels and bioproducts, said Michael McAdams, president of the Advanced Biofuels Association, noting that biorefining companies stand ready to deliver on that promise to reduce consumption of foreign oil and deliver more environmentally sustainable fuels. "The challenge for us in the short-term is the requirement for a private-public partnership through the existing programs that are on the books, and maybe crafting new programs moving forward," he said. "The American people want cleaner fuels; they want renewable fuels, and we stand by ready to deliver those fuels."
However, in order to make that promise a reality, McAdams said the industry needs parity in the tax code. "We need accessible and user-friendly programs, whether they be grant programs or loan guarantee programs, which can deploy resources in the short-term so we can get these gallons up and running." At a minimum, McAdams continued, the lame duck session of congress needs to address current tax provisions that must be extended. "That is a promise that was made to the industry by government that needs to be fulfilled," he said.
According to Algal Biomass Organization Mary Rosenthal, there is also a specific need to create parity in the tax code that extends current incentives for biofuels to algae-based fuels. She said that parity is critical to allowing algae-based biofuels to become price competitive with other forms of biofuels.
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It is also important to understand the importance of supporting domestic technology development through these incentives. "The question for us today is will our nation lead in the development of this technology, or will be end up being a net importer of technology or fuels?" Rosenthal said. "We hope and expect that the federal government will leverage all the tools at its disposal to move our industry forward, creating jobs, developing domestic energy, and increasing our national security."
The biorefining industry is ready to deploy new technologies today, said Wes Bolsen, chief marketing officer and vice president for government affairs at Coskata Inc. "There has been a significant amount of research and development dollars put out over the last two to three years, but now what we need is the enduring government policy that is going to get the first commercial facilities built," he said.
Steel is not being put into the ground today for new commercial-scale facilities, Bolsen continued. "We need to start building, and we need to start building now," he said. "That’s what the loan guarantee programs were meant to do…We need the policy and the loan guarantee programs working, but in parallel with that we need investment tax credits and extension of the production tax credits past the end of 2012."
Ben Locke, director of government programs at Metabolix, noted that many of the same issues facing biofuel companies are facing the developers of biochemicals and bioplastics in the arena of federal policy and incentives. The job creation potential alone should be helping to drive government support of all three industry sectors in the current economic environment, he continued.
"This is really an opportunity, I think, for the United States," Locke said. "Without a doubt, the United States has a competitive advantage in industrial biotechnology." However, he said that sustained federal policy will be critical in maintaining that edge. "It’s a competitive advantage we have right now, but it’s not going to last forever," Locke continued, noting that several Asian countries are heavily courting biorefining companies.
This is clearly demonstrated by a decision bioplastics producer NatureWorks LLC will soon face. According to NatureWorks CEO Marc Verbrugge, demand for his company’s products has been growing by 20 to 30 percent annually. NatureWorks currently produces its products in the U.S., but exports approximately half its products overseas.
Due to increased demand, the company needs to increase production. "We are looking at a major expansion of capacity," Verbrugge said. "Now, we can put that capacity anywhere in the world…Countries in Southeast Asia are extremely eager to get the bioplastics industry to locate in that part of the world. Today the U.S., for bioplastics, doesn’t really offer [any incentives]. In the next six months, as CEO of the company, I will have to make a decision on whether I invest hundreds of millions of dollars in the United States-and by doing so, create hundreds of green jobs-or whether I will put that facility in place in Southeast Asia…The only thing we would like to get from the U.S. government is parity between bioplastics and biofuels. Now, even with that parity, I think the incentives overseas are significantly larger than what the U.S. is probably able to offer, but at least it would give us some support to put additional green jobs in the United States."